Israel has declared the latest attempted ceasefire in Gaza over, saying Hamas militants breached the fragile truce soon after it took effect.

Both the US and the United Nations are also blaming Hamas for ending the 72-hour truce, which was the most ambitious attempt so far to end more than three weeks of fighting amid a rising Palestinian civilian death toll.

The plan was designed to give civilians in the Palestinian enclave time to bury the dead, assess the damage, and re-stock food and medical supplies.

Analysis: correspondent Matt Brown in Gaza

An hour-and-a-half after the ceasefire came into effect, [the Israeli military] had a force in the south of the Gaza Strip working to neutralise a tunnel, one of these tunnels that Hamas uses either to get into Israel under the fence Israel put around Gaza or to affect ambushes inside the Gaza Strip.

In the course of trying to neutralise that tunnel, it says its force came under attack, that militants emerged from a tunnel, one of them was a suicide bomber who blew himself up and killed two Israeli soldiers. Another opened fire with an assault rifle.

Around that time, there were reports of mortar fire aimed out of Gaza which subsequently, the reports are, we know that it fell short inside Gaza. But there were also reports around that time of rocket fire coming out of Gaza.

The ceasefire dissolved obviously very quickly, but it was supposed to go on for 72 hours and that was supposed to give a period of negotiation.

Remember, it came into effect simply to end the bombing. Israel insisted it would stay inside Gaza and obviously in close proximity to its enemy and risking this sort of friction, but insisted it would stay there to neutralise these tunnels which is says are a threat to its home territory.

And now, obviously the faith between the two sides is absolute zero, if it's possible to go below zero then it's below zero.

After the incident in the southern Rafah area Israel's army warned residents to stay in their houses as it "pursued terrorist elements".

Gaza officials said Israeli shelling in Rafah killed at least 62 people and wounded more than 350 in the area.

Israeli prime minister Benjamin Netanyahu has called a special session of his security cabinet, warning Hamas and other Palestinian militant groups they will bear the consequences of their actions.

US president Barack Obama has called for the release of the captured Israeli soldier as a precondition for resolving tensions.

"If they are serious about trying to resolve this situation, that soldier needs to be unconditionally released as soon as possible," he told a news conference.

"A ceasefire was one way in which we could stop the killing, to step back and try to resolve some of the underlying issues.

"Trying to put that back together is going to be challenging, but we will continue to make those efforts."

Stephane Dujarric, a spokesman for the UN secretary-general, echoed the call.

"The secretary-general is deeply concerned about the resumption of Israel attacks on Gaza instead of giving both sides, especially Gazan civilians a much need reprieve to let them attend to their injured, bury their dead and repair vital infrastructure, this ceasefire is now leading to renewed escalation," he said.

'This should not be a condition for any child to live in'

Osama Darma is working with the aid organisation Save the Children in Gaza City. He says he was completely dismayed by the news that the ceasefire had ended.

"What the people are seeing here, mainly children, even adults should not be exposed to," he told the ABC's AM program.

"Any six-year-old child in Gaza at the moment has already witnessed three major offences, three major military operations.

"And this should not be a condition for any child to live in. It shouldn't be actually be condition for any human being, not only children."

Israel launched its offensive in Hamas Islamist-dominated Gaza on July 8, unleashing air and naval bombardments in response to a surge of cross-border rocket attacks. Tanks and infantry pushed into the territory of 1.8 million on July 17.